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Hedge Fund Governance Bell Rock Group

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Hedge fund managers continue to witness extremely difficult market conditions combined with increased investor activity and litigation. Hedge funds increasingly face scrutiny from fund of hedge funds, institutional investors and distributors as the due diligence process becomes more erroneous, detailed and time consuming year on year. Existing investors are re-evaluating their investments with risk mitigation being their main focus. Investors are placing ever-increasing demands for information and transparency.
The corporate governance framework of a hedge fund must be able to withstand this rigorous scrutiny. Hedge fund managers that demonstrate the highest standards of corporate governance are more likely to retain their existing investor base and to attract new investors. Fundamentally, this enhances a managers ability to sustain and increase assets under management.

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Hedge Fund Governance Bell Rock Group

  1. 1. Hedge Fund Corporate Governance Current Developments in Fund Governance Responsibilities of the Board of Directors Hedge fund managers continue to witness extremely difficult market conditions combined with increased investor activity and litigation. Hedge funds increasingly face scrutiny from fund of hedge funds, institutional investors and distributors as the due diligence process becomes more erroneous, detailed and time consuming year on year. Existing investors are re-evaluating their investments with risk mitigation being their main focus. Investors are placing ever-increasing demands for information and transparency. The corporate governance framework of a hedge fund must be able to withstand this rigorous scrutiny. Hedge fund managers that demonstrate the highest standards of corporate governance are more likely to retain their existing investor base and to attract new investors. Fundamentally, this enhances a managers ability to sustain and increase assets under management. Regulators like the Securities and Exchange Commission ("SEC") expect more from investment advisors who manage hedge funds from a risk management and regulatory prospective. The SEC continues to focus closely on risk management in areas such as portfolio valuations, conflicts of interests, counterpart risk, remuneration and fees. The Cayman Islands Monetary Authority has also taken steps with the introduction of the Statement of Guidance on Corporate Governance to set out minimum standards of governance with regard to regulated entities, minimum board meetings and for the board to address conflicts of interest. The regulatory landscape has continued to evolve with the industry navigating AIFMD and FATCA. Directors need to be acutely aware of the additional compliance requirements involved and the impact of regulations that may impact the operation of the fund and its investors. Moreover, directors’ face increased workloads, more responsibility and expectations, much higher than before, from stakeholders who demand directors who are experienced across of wide range of areas, professionally qualified, hands-on, up to date with regulatory changes, responsive, probe across a spectrum of risk areas, transparent and independent. The board of directors has a fiduciary responsibility to the fund investors and oversight of the fund's management. Though not an exhaustive list, responsibilities of a board include the following: Detection of fraud and misconduct Ensure compliance with the fund's risk management guidelines Ensure compliance with the fund's investment strategy Monitoring of the fund's NAV and reviewing the fund's investment performance Review of service providers performance and addressing any issues Review of the adequacy and accuracy of information provided to investors from the fund's management Addressing compliance and regulatory matters affecting the fund or its investors Ensuring that board meetings are held, a clear agenda is set, conflicts of interest are addressed, action points indicated for follow-up and accurate minutes taken. In addition, directors should be available at short notice to address any urgent matters. A board that possess the skills to effectively perform the responsibilities can reduce operational risk and mitigate the conflicts of interest that exist between the fund manager and the fund's investors. Institutional investors will evaluate the experience as part of their own due diligence on the board members and determine if the directors possess the required skill and have adequate time to meet their responsibilities. March 2015
  2. 2. Hedge Fund Corporate Governance Bell Rock Corporate Governance - Core Values Bell Rock’s mission is to enable hedge fund managers to demonstrate the highest level of corporate governance, which will assist managers to retain and enhance credibility with investors, regulators, distributors and the media. Expertise - Our industry professionals have over 15 years of international finance experience with a combination of risk management, asset management, finance and legal qualifications. Our experience acting on the boards and our strong connections to the industry enables us to work with stakeholders from the very start to provide advice and recommendations on implementing the highest standards of corporate governance. Independent - we are independent with no actual or perceived conflicts of interest that can sometimes arise with directors provided by other service providers such as law firms or administrators. Governance Reviews - Bell Rock’s industry experienced professionals can assist hedge fund managers by conducting a detailed review of the corporate governance aspects of their hedge funds and advising on the appropriate solutions. Collaborative - Bell Rock works in a collaborative manner with all stakeholders to implement industry recommended corporate governance. Regulated - our professionals are authorised and regulated by the Cayman Islands Monetary Authority under the recent Director Directors Registration and Licensing Law, 2014. The Bell Rock Group is also regulated by CIMA under the Companies Management Law. Contact us for more information at info@bellrockgroup.com Tel: 1-345-949-4850 Skype: bellrockcorporate 10 Market Street, 758 Camana Bay, Grand Cayman Cayman Islands, KY1-9006

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